Markets as Artifacts: Aggregate Efficiency from Zero-Intelligence Traders

Yale ICF Working Paper No. 02-16

25 Pages Posted: 13 May 2002

See all articles by Shyam Sunder

Shyam Sunder

Yale University - School of Management; Yale University - Cowles Foundation

Multiple version iconThere are 2 versions of this paper

Date Written: May 2003


Three phenomena-the disparity between the assumed and observed attributes of economic man, the link between nature and artifacts, and the use of computers as a source of knowledge--fascinated Herbert A. Simon. He built a new paradigm for each field—bounded rationality to deal with the disparity, the science of the artificial as its link to nature, and artificial intelligence for creation of knowledge. In this paper we show that the sciences of the artificial and computer intelligence also hold a key to an understanding of the disparity between individual behavior and market outcomes. When seen as human artifacts, a science of markets need not be built from the science of individual behavior. We outline how, in the nineties, computer simulations enabled us to discover that allocative efficiency-a key characteristic of market outcomes—is largely independent of variations in individual behavior under classical conditions. The Sciences of the Artificial suggests such independence and points to its benefits.

Keywords: Efficiency of Markets, Zero Intelligence, Decision Making, Bounded Rationality, Minimal Rationality Economics

JEL Classification: A12, B25, C9, D44, D81

Suggested Citation

Sunder, Shyam, Markets as Artifacts: Aggregate Efficiency from Zero-Intelligence Traders (May 2003). Yale ICF Working Paper No. 02-16. Available at SSRN:

Shyam Sunder (Contact Author)

Yale University - School of Management ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-6160 (Phone)


Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

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